Wheat rallies to trading range high

Wheat markets were fairly quiet the first part of the week, but found some legs late in the week as the Kansas and Oklahoma crop tours wrapped up with projections that were deemed disappointing. We'd expected poor numbers out of Oklahoma, but Kansas only produced 'average' yield estimates which were viewed low considering the abundant moisture they've received since the frost.

The tour's participants project that Kansas wheat production will total 333 million bushels, down from last yearâ€™s tour projection of 379 mb, and below the actual production in 2008 of 356 mb. Yields were projected to be 40.8 bu/acre, compared to last year's estimate of 43.3 bu/acre. Oklahoma's tour projected only 77 mb, less than half of last year's 166 mb. The Kansas group did note some disease pressure in southern regions along with some nutrient deficiency and frost damage.

Informa released their acreage estimates on Friday, with total wheat acres at 58.9 million, which compares to USDA's estimate of 58.6 million. Other spring wheat was pegged at 13.5 million, compared to USDA's projection of 13.2 million. This is certainly a surprising assessment given that spring wheat plantings are so far behind schedule and the long held assumption that weâ€™d actually lose spring wheat acres.

China also release their wheat production estimates, raising '09 production 2.2 MMT to 113.2 MMT, just barely higher than last year. Winter wheat production is forecast to be 107.2 MMT, up .2%. Their expected usage will be 103 MMT, leaving them with another 9 MMT added to their current stocks of 60 MMT. At 69 MMT, their carryover would equal about 2/3 of their total usage, a huge number. Clearly, their increase of the government support price has accomplished its objective of increasing production.

The rest of the Northern Hemisphere is looking in very good shape for wheat production. The dry region of Ukraine and western Russia has received good rains, with more forecast for Russia. Hungary is the only country reporting lingering dryness. Europe has plentiful moisture and the crop is off to an excellent start. India is wrapping up another bumper harvest and struggling to find storage space. They are expected to re-open the export channels but will find it difficult to compete without heavy subsidies.

Argentina is projecting a much different story as the drought continues to plague their production regions. They are looking at the lowest wheat plantings in 100 years unless it rains very soon. They can plant into early June, and forecasts are suggesting rains to fall this week. Australia is progressing with planting, with Western Australia still looking fairly dry.

World cash prices have risen as Russian prices have increased on declining exportable supplies. The US is still slightly above Russian offers but in a much more competitive position as the dollar continues its slide.

The seasonal tendency is for wheat to put in its spring high in late April/early May, and prices have certainly rallied into this time window. Fridayâ€™s rally barely broke above the trading range high, pulling in a large amount of fund buying. Weâ€™ll see what kind of numbers USDA gives us on Tuesday, but it seems to me that wheat would have difficulty moving higher from here, particularly considering that harvest will be starting in the southern plains in about three weeks.